Political Roundup: Cyclone Gabrielle - how will we pay for the recovery? Tax the rich - Branko Marcetic

OPINION

Cyclone Gabrielle is already being declared a turning point for New Zealand. The devastation it’s left across the country seems to have sparked a wholesale rethinking from our politicians and pundits about a lot of what’s passed for conventional wisdom in our politics. It’s viscerally exposed the grim results of years of infrastructure underinvestment. It’s shown the need to rebuild our manufacturing sector at home and strengthen our flood resilience. Most importantly, we’re told, it’s shown first-hand we need to treat climate change with the urgency it demands, with even the National Party showing signs of moving away from its foot-dragging on the issue.

Rebuilding critical infrastructure, giving a hand up to the thousands left homeless and in need, and speeding up the transition to a green economy: this is going to be an enormous undertaking, and is not going to come cheap. While we won’t have a firm number for a while, Finance Minister Grant Robertson predicts the cost will be in the multi-billions of dollars, likening it to the scale of the $40 billion Canterbury rebuild. Getting all of this done means turning away from the pound-foolish fiscal conservatism that’s now prevailed across first National, and now Labour governments, fostering the chronic underinvestment that even the government itself now acknowledges has made the severity of this disaster much worse.

So why is it that in the wake of this pressing emergency, as we seem to slowly be facing up to the realities of the monumental task ahead, politicians and the media are still stuck in the same conservative mode that prevailed pre-Gabrielle?

National leader Christopher Luxon still wants the tax cuts that will further starve the government of the revenue it will need to meet these challenges, while simultaneously denouncing a “blank cheque” for the response. In his recent interview with Robertson, TVNZ’s Jack Tame repeatedly pressured the finance minister to keep within Labour’s self-imposed fiscal restraints and “tighten your belt.” Robertson himself said the government might have to redirect existing spending to meet these needs, and stressed at one point it “simply has to find that” money to be able to pay for part of the ensuing costs. Auckland Mayor Wayne Brown suggested spending pressures meant there’d be a trade-off between cutting carbon emissions versus building future resilience. National MP Shane Reti now infamously took to publicly asking billionaire Elon Musk to donate hundreds of Starlink terminals to the country.

Dr Shane Reti has asked Starlink to provide satellite support around New Zealand. Photo / Bevan Conley

It seems everything’s changed — and nothing has.

At least based on these statements, the government, and certainly much of our political and media class, is still operating from within the stifling fiscal corner the Labour government has painted itself into over the past six years. That approach has seen Labour refuse to finance desperately needed public investment by taking on too much more debt, while at the same time ruling out a string of obvious revenue-raising measures: no wealth tax, no inheritance tax, no capital gains tax, no higher tax rate on trusts, no windfall profits tax that other governments, even a Conservative British one, have imposed on the businesses that made a killing over the course of the pandemic.

As a result, we’re in the somewhat absurd situation of being a wealthy country facing myriad expensive crises, but having to ration out our response to them because the cupboards are supposedly bare — or, even more embarrassingly, finding our MPs begging foreign billionaires for help.

But New Zealand doesn’t lack the means to pay for these things, nor do we need to explode the deficit to afford them, since that still seems to be the overriding priority for our political establishment. The fact is that New Zealand is a country that provides a home to 14 billionaires, most of whom have been getting richer, who collectively sit on wealth worth nearly $37 billion, while at last count, there are 347,000 people in the country worth US$1 million or more. A significant number of those will be ordinary homeowners who have seen the values of their houses lately balloon, but many are not.

According to the 2022 Knight Frank Wealth Report, the number of ultra-high net worth individuals in New Zealand — meaning those worth a staggering US$30 million or more — rocketed up 150 per cent from 2016 to 2021, at which point they numbered 3118. This cohort is predicted to increase another 48 per cent by 2026, with New Zealand leading the field in all of Asia as the continent looks set to overtake Europe as the world’s second-largest regional wealth hub, according to the report. Meanwhile, calls for a windfall tax have been fuelled by news of corporate profits surging and looking on track to rise even further, much of it concentrated in sectors like fossil fuels, banking, electricity and supermarkets, even as other sectors like hospitality have struggled.

In other words, it’s a fairly small segment of the country that would be affected by revenue-raising taxes targeting extreme wealth and pandemic-era profiteering, which would in turn help the government meet the cacophony of crises now facing the country as a whole — a course of action that the ultra-rich, too, would benefit from, given that they depend on the same resilient infrastructure and climate disaster mitigation the rest of us do. It’s simply absurd that at a time like this and given the scale of what’s needed, we would continue on a path where the wealthy and big business keeps contributing less in tax than they have through most of New Zealand’s modern history, or worse, pay less than the lowest earners.

Prime Minister Chris Hipkins should have reversed his predecessor’s rejection of revenue-raising measures when he first took the reins, at the same time that he jettisoned several of the Ardern government’s least popular big-ticket policies. That he didn’t was a missed opportunity. But the destruction wrought by Gabrielle provides a second chance to do so. If the scale of this emergency and the crises that helped cause it doesn’t justify changing course on Labour’s refusal to tax the rich, what on Earth ever will?